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Which of the following statements is not true? a
Which of the following statements is not true?
a. In the presence of a market failure, government action will always improve the market outcome.
b. In the presence of a market failure, government action can sometimes improve the market outcome.
c. In the presence of a market failure, government action might not improve the market outcome because some leaders are not fully informed about the effects of their actions.
d. In the presence of a market failure, government action might not improve the market outcome because sometimes public policies simply reward the politically powerful.
Expert Solution
Which of the following statements is not true? a. In the presence of a market failure, government action will always improve the market outcome.
Sometimes even the most well-intended government regulations do not have the desired effect. Externalities are one example. The most commonly recognized externality is the pollution of the environment by a manufacturing business. Many corrections have been tried in the United States, including fines, penalties, and even market-based solutions like cap-and-trade, which amounts to selling permits to pollute. None of these solutions has worked perfectly over time, and the problem is not yet solved.
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